A daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
National Bank economists put some numbers on Canada’s seemingly unstoppable housing market,
“On a seasonally adjusted basis, home sales increased 1.0 per cent from December to January, a fourth monthly increase in five months… New listings dropped by 11 per cent during the month, exacerbating the lack of supply in the market … the housing market was tight in nine of the ten provinces [ Saskatchewan balanced] … Housing starts fell 7.7k to a 15 month low of 230.8k units in January. The Teranet- National Bank Composite National House Price Index increased 1.1 per cent in December compared with November after seasonal adjustment. The index has seen record growth in 2021 as house prices rose 15.5 per cent year over year, breaking the previous peak reached in 2016.
Housing Markets Monitor – National Bank Economics
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Continuing the theme, BMO chief economist Doug Porter penned The Madness of King Housing,
“The Canadian housing market has just seen bigger increases than ever witnessed through any two years of the great housing bubble of the late 1980s. Just as a reminder, that episode ultimately saw the overnight rate climb to 14% to quell inflation and bring the market to heel. Prices then went into the wilderness for a decade. Some of the wildest markets in the country remain smaller and medium-sized cities in Ontario. Not to pick on Brantford, but that fine city—previously known mostly as the home of Wayne Gretzky—has seen prices rocket 86% in two short years. Similar tales can be found in Barrie, Welland, Tillsonburg, Woodstock, Chatham and Guelph. Do you seriously believe that each and every one of these smaller centres suddenly suffers from a supply shortage, or could it possibly be that a common demand factor is driving the madness across the entire region?”
Mike Moffat, assistant professor and Western University’s Ivey Business School, objected to this characterization online. Mr. Moffat has done considerable analysis on the exodus of homebuyers from the GTA into some of the more affordable markets mentioned in the BMO report.
“BMO: The Madness of King Housing” – (research excerpt) Twitter
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The Citi global strategy team see the beginnings of some major shifts in investment capital,
“The fund flows driving three recent rotation trades (bonds to equities, US to RoW [ rest of world] , Growth to Value) remain fairly small. Further capital re-allocation should support our current strategies: buy the dips, favor UK and Japan, overweight Financials. Rotation #1: Bonds to Equities — Bonds are on track for two consecutive months of outflows, while equities have seen solid inflows. This rotation remains small in a historical context. There is scope for much more. Rotation #2: US to RoW — Equity inflows have been strong across all geographies. However, investors are starting to show a preference for global funds that exclude the US. Rotation #3: Growth to Value — In line with this year’s price action, Value funds have seen strong inflows relative to Growth. However, this still looks small compared to 1Q21′s Value rotation. More Room to Run — Ongoing shifts in capital flows could drive these three rotations further. Global equities still look cheap against bonds. Rest of World (RoW) indices look attractive against the US. Value is still lowly rated versus Growth.”
“Citi: “Ongoing shifts in capital flows could drive these three rotations further”” – (research excerpt) Twitter
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Diversion: Fly on the Wall with Dana Carvey and David Spade. Guest Laraine Newman – Open Spotify (podcast) -
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Scott Barlow